China's Food Delivery Wars Eroding Alibaba and Other Companies' Profit Margins

China's food delivery market is experiencing intense competition between Alibaba Group, Meituan, and JD.com, with all three platforms offering heavy subsidies to attract users and drive growth. The competition has resulted in record highs for orders and users, but has also taken a bite out of profits. The market has become increasingly heated, with platforms offering free goods such as bubble tea and coffee to attract users.

China's food delivery market is witnessing intense competition between Alibaba Group, Meituan, and JD.com, with each platform offering substantial subsidies to attract users and drive growth. This competition has led to record-breaking order volumes and user bases, but it has also taken a toll on profits. The market has become increasingly heated, with platforms offering free goods such as bubble tea and coffee to attract users.

JD.com, Alibaba, and Meituan are expanding their delivery networks and pledging billions in subsidies. This has benefited consumers with insanely fast and cheap offers. For instance, JD.com offered coffee at 10.9 yuan ($1.50), including delivery fees, while Meituan offered a set of steamed buns at 13 yuan and a McDonald's breakfast set at 26.8 yuan [1].

However, this price war has weighed heavily on investors and the earnings outlook. Meituan and JD.com have seen their shares fall by about 22% and 10%, respectively, this year [1]. Alibaba's market value has dropped by $100 billion due to the competition, with its Hong Kong-listed shares declining by 27% since March [2].

The competition escalated after JD.com entered the food delivery market in February, targeting Meituan's dominance with aggressive subsidies [2]. Alibaba has responded by merging Ele.me and Fliggy into its core e-commerce unit and launching a 50 billion yuan ($7 billion) subsidy program [2]. Meituan, on the other hand, has seen its daily active users rise to around 230 million, with 80 million deliveries on Saturday [2].

While all the companies have boasted about increases in their instant commerce user bases, it remains unclear how much the price war will impact their earnings. Meituan reported profits for the first quarter of 2025 were 10.2 billion yuan, up about 63% year over year, but warned that the following quarter would likely be impacted by increased competition in instant retail [1]. Similarly, JD.com reported a 31.4% year-over-year increase in operating profit in the first quarter but expects second-quarter profits to fall [1].

Looking ahead, analysts warn that the price wars could lead to significant losses for these companies. Nomura estimates that JD may have to re-examine its ambition, potentially burning through all the profits generated by its core retail business for several quarters to compete with Alibaba and Meituan [1].

References:
[1] https://www.cnbc.com/2025/07/11/china-instant-commerce-price-war-billions-subsidies-jd-alibaba-meituan-ele-me.html
[2] https://www.benzinga.com/trading-ideas/movers/25/07/46387027/alibaba-bleeds-billions-as-delivery-price-war-erases-100-billion-in-market-value